Report: Sony, YouTube in talks to license films

Sony Pictures may be in talks with YouTube to license some of its films—in …

In its ongoing quest to do something that will help it make money, YouTube is reportedly in talks to license full-length films from Sony Pictures. If true, the move will allow YouTube to better compete with the content NBC-owned Hulu, which already streams a wide variety of full-length movies and TV shows. The talks with Sony come as YouTube is poised to lose almost $500 million this year, according to two analysts, highlighting the company's need to tweak its business model—and fast.

News of the talks between YouTube and Sony come by way of "sources familiar with the negotiations" speaking to CNET. There are no specific details available about the deal, though it could make Sony one of the first studios to put its movies on YouTube.

In November of 2008, MGM said that it would begin posting some of its own full-length movies to YouTube, so word of licensing negotiations with Sony don't come as a surprise. With MGM on board with a few of its films and a deal with Sony possibly in the works, YouTube is taking baby steps in the right direction. Hulu's carefully-sandboxed approach to online video has been very attractive to content owners as of late, but YouTube is still the far more popular site.

YouTube needs all the help it can get when it comes to marketing premium content to its users, because the company is on track to lose around $470 million in 2009, according to Credit Suisse analysts Spencer Wang and Kenneth Sena. In a report sent out last week (seen by Multichannel News), the analysts said that YouTube would generate about $240 million in revenue—up about 20 percent year-over-year—but that the costs of bandwidth, licensing, revenue shares, and other expenses would top $711 million.

"In our view, the issue for YouTube going forward is to increase the percentage of its videos that can be monetized (likely through more deals with content companies) and to drive more advertiser demand through standardization of ad formats and improved ad effectiveness," the analysts said.

The studios have historically been very wary of YouTube, due primarily to the amount of user-uploaded copyrighted content present—indeed, that is the crux of Viacom's $1 billion lawsuit against YouTube. At the same time, they seldom hesitate to make use of YouTube's thriving user base to market their goods via uploaded movie trailers and clips. If MGM's (and hopefully Sony's) experiments with full-length films are successful, however, others may be more willing to hop on board with more than just clips.